Northern Rock: Takeunder Candidate


says that Christopher Flowers doesn’t seem to have sustained much reputational

damage in the UK from the fact that he’s desperately trying to unbuy Sallie

Mae. Certainly there don’t seem to be too many obstacles in his way should he

go ahead with his bid for Northern Rock. But it’s equally clear that unless

and until such a bid emerges no one’s counting any chickens.

For one thing, some lenders to Northern Rock have already formed

a committee under the direction of Houlihan Lokey Howard & Zukey, restructuring

specialists, "to protect their interests" given that they "face

substantial losses" if Northern Rock is sold. That’s surprising, given

that Northern Rock still has a market

cap of about $1.5 billion – presumably that’s the amount of value

left over in the bank once all its creditors have been paid off in full.

We’re also told that Northern Rock is considering

staying independent, relying on a £10 billion credit line from adviser

Citigroup. It’s far from obvious why that would be an attractive option if there

really is, as rumored, serious interest in the bank not only from Flowers but

also from the likes of Cerberus, Blackstone, and Apollo.

Northern Rock’s management and a large number of its lenders, then, are clearly

far from convinced that a real offer will emerge, even as speculators are bidding

up its stock in hope that some private-equity shop or other will swoop in and

give them a windfall. My guess? A takeunder, where Northern Rock agrees to sell

itself at some discount to the secondary-market price. The private-equity shops

know, along with management and shareholders, that this is a distressed asset,

so I doubt much of a bidding war will emerge.

This entry was posted in banking, private equity. Bookmark the permalink.